What Uber Teaches You About Your Child’s Future

During these trips, I talked to the cab drivers about their thoughts on Uber.

In these conversations, some interesting insights emerged.

The common theme is this – They can’t believe that Uber, with a simple software product, is getting the lion’s share of profits.

Their contention was that the traditional sources of investment in a business is all made by them.

They invest the capital needed to buy the car.

They invest the manual labor needed to drive.

They cover all the gas and maintenance expenses.

However, Uber walks away with all the profit.

How could this be?

Therein lies the power of software.

All that physical infrastructure is needed and will be there. But software is what makes them productive and efficient. As a result, it is the most profitable part in the value chain. That is also why Uber is valued at $70 Billion.

We see the same story with Airbnb. All those beautiful exotic houses are needed, but Airbnb is what puts them to productive use. As a result, they make all the profit. Today, Airbnb is valued at $30 Billion.

Even in FedEx, much of the value of FedEx as a company is in the software that runs the firm, not in the planes, trucks, sorting centers and drivers.

This trend is what prompted legendary Netscape inventor and venerated venture capitalist Marc Andreessen to say, “Software is eating the world”. You can read that article here.

What does this mean for your children?

If software is the most profitable part of a firm, working with software skills will give your child a great chance to make a lucrative career.

Even if they don’t end up becoming software engineers, knowing how the most profitable parts work, will only keep them ahead of the rest.